CHICAGO, March 28 Agribusiness giant Cargill Inc
said on Wednesday it would cut production of meat scraps critics
call "pink slime" and said consumer resistance to the filler
could lead to higher hamburger prices during the grilling season
beginning this spring.

Cargill's move came two days after leading producer Beef
Products Inc shut down three of four facilities making the
filler and said 650 jobs were at risk. Cargill did not say
whether any jobs at its plants were affected.

Concern that higher hamburger prices could discourage
consumer demand for beef drove down cattle futures prices at the
Chicago Mercantile Exchange more than 1 percent on Wednesday.

At issue is a product the meat industry calls "finely
textured beef" that is made from the scraps of meat left over
from breaking a carcass into cuts such as steaks and roasts. It
was widely used as filler in hamburger.

Consumer activists including celebrity chef Jamie Oliver
campaigned to ban it, calling it "pink slime" and showing
pictures of unsightly globs on television and the Internet.

"Some Cargill customers have eliminated FTB (finely textured
beef) from their products. Some Cargill fresh beef customers
have asked us to provide ground beef without (it)," Cargill
spokesman Mike Martin said in an email to Reuters.

The beef industry was caught off-guard by the campaign,
which prompted a flood of consumer complaints and led to
supermarket chains and food companies rejecting the product.
This could force meat packers to use higher quality beef for
hamburger and increase prices.

Supporters of the meat industry on Wednesday fought back,
calling the product safe to eat. Iowa Governor Terry Branstad
appeared with U.S. Agriculture Secretary Tom Vilsack in Des
Moines, Iowa and said consumer activists were conducting a
"smear campaign" against meat producers.

Vilsack said the agency would stick with its recent
announcement allowing school districts to choose whether they
wanted hamburger with filler for school lunches.

Hundreds of school districts had asked the USDA to ban the
product from school lunches and government had a duty to
respond, Vilsack said.

"Let me reiterate without any equivocation something that we
have said hundreds of times ... this product is safe," Vilsack
said. "There's no question about it."

The nation's top three supermarket chains -- Kroger Co,
Safeway Inc and Supervalu Inc -- all said they would no longer
sell hamburger containing the product. Walmart, the nation's
largest food seller, said it would no longer use the product in
its trays of hamburger.

McDonald's was the first major fast food company to stop
buying hamburgers including finely textured beef last August and
some other fast food companies quickly followed.

Cargill said it was not completely halting production of the
beef product, which is made at four of its five plants.

In another bid to counter the negative image of the product,
Branstad will accompany fellow Republican governors Sam
Brownback of Kansas and Rick Perry of Texas on a tour of a Beef
Products Inc plant in South Sioux City, Nebraska, on Thursday.

Branstad, who said he had been eating the beef filler for 30
years, blamed the campaign against it on people opposed to any
meat in the diet and said it could damage his farm state's
economy. Iowa is dependent on raising livestock and the corn and
soybeans farmers grow to feed the animals.

"There are groups out there that don't like meat
consumption, who don't want people eating meat," Branstad said.

Any sharp pullback in demand for beef could put a
significant dent in earnings of meat companies, which are
gearing up for the spring outdoor grilling season.

Finely textured beef is made by taking the carcass scraps
and heating them to separate the fat. Some producers spray it
with ammonia to kill bacteria, and then add it to hamburger. The
beef industry says the product is 98 percent lean meat.

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